Philips bolstered by outlook for healthcare business

Toby Sterling

3 Min Read

AMSTERDAM (Reuters) - Strong orders for its healthcare business helped to boost shares in Philips PHG.AS, the Dutch company which is seeking to focus on scanners and medical technology and shed its traditional lighting operations.

A Philips logo is seen at Philips headquarters, where Philips CEO Frans van Houten gave a presentation of the company's 2013 full-year results, in Amsterdam January 28, 2014. REUTERS/Toussaint Kluiters/United Photos

Philips CEO Frans van Houten said he expected modest growth in sales and earnings in 2016, with improvements mostly coming in the second half of the year.

The company saw an increase in sales in China, its biggest growth market, although Van Houten could not say whether he expected the trend to continue as the economy there slows.

“It’s certainly gratifying to see the rebound, both in orders and sales growth, especially on the healthcare side, but it comes after several quarters of slow growth,” van Houten told reporters.

“I don’t think we can declare that the (China) slowdown is over after one quarter.”

Van Houten said the company remained on course to sell or float its lighting division in the first half of this year.

Last week the U.S. blocked Philips’ plan to sell an 80 percent stake in its Lumileds lighting components division to Chinese investors for $2.7 billion.

Van Houten said that division will now likely be sold for a lesser amount in the second half of 2016.

The breakdown of the Lumileds deal left Philips under pressure as it tries to carry out several strategic operations at once.

It has been attempting to spin off its lighting and lighting components businesses since 2014 to focus on its core businesses of medical scanners and healthcare technology.

Shares, which were down 18 percent over the past 12 months, initially surged 8 percent in Amsterdam and traded 4.7 percent higher at 0955 GMT.

Results “were as good as we’ve seen in a long time,” Barclays analysts said in a note.

“Comparable intake in Healthcare reached 15 percent, by far the highest of the big three,” they said, referring to Philips and its main competitors GE GE.N, and Siemens SIEGn.DE.

Barclays has a ‘neutral’ rating on Philips shares.

Shares in Siemens also rose 6.6 percent on Tuesday after the German company raised its full-year earnings forecast on the back of a strong start to its financial year.